Thursday, June 9, 2011

CONSUMER BEHAVIOUR

CONSUMER BEHAVIOUR

It is a segment or part of human behaviour. Human behaviour refers to the total process whereby the individual interacts with the environment. Every thought, feeling, or action that we have as individuals is part of human behaviour.

Definition:Consumer behaviour is the study of how individuals, groups and organizations select, buy and dispose of goods, services, ideas or experiences to satisfy their needs and wants.

Importance; It seeks to understand the consumer buying decision process and to answer the following questions;

Who makes the market?
Who do they buy from?
What does the market buy?
When do consumers buy?
Why do they buy?
How do they buy?

The marketer wants to know how consumers respond to various marketing strategy the company might use. It helps the firm to find better ways to satisfy consumers through creating a suitable marketing mix that will meet customer’s needs and requirements better than competitors.

Understanding Consumer Behaviour: 7 O’S Framework:

Who is the customer? Occupants
what does the consumer buy? Objects
why did they buy? Objectives
Who participate in the process? Organisation
When did they buy? Occasions
Where do they buy/ Outlets
How did they buy? Operations

Consumers make many buying decisions every day. Most companies are interested to know what consumers buy, where they buy, how and how much they buy, when they buy, and why they buy. But learning about the consumer buying behavior is not easy task The central question for marketers is how consumers respond to various marketing stimuli The company that understands how consumers will respond to different product features, prices, and advertising appeals has a great advantage over its competitors. The starting point is the stimulus-response model of buyer behavior This figure shows that marketing and other stimuli enter the consumer’s “black box” and produce certain responses.

Marketing stimuli consist of the four Ps: product, price, place, and promotion. Other stimuli include major forces and events in the buyer’s environment: economic, technological, political, and cultural. All these inputs enter the buyer’s black box, where they are turned into a set of observable buyer responses: product choice, brand choice, dealer choice, purchase timing, and purchase amount. The marketer wants to understand how the stimuli are changed into responses inside the consumer’s black box, which has two parts. First, the buyer’s characteristics influence how he or she perceives and reacts to the stimuli. Second, the buyer’s decision process itself affects the buyer’s behaviour.

Stages of the consumption process:

Pre-purchase: problem recognition & information search

Purchase: mental evaluations & making of decision

Post-purchase: The activities that the consumer undertakes after the purchase and includes; how he uses the product, his degree of satisfaction, and actions taken after the purchase is made.

Participants in the buying process (The D.M.U.-Decision Making Unit)

The marketer needs to know which people are involved in the buying decision. People might play any of several roles in the buying decision process;

§Initiator:the person who first suggests or thinks of an idea of buying a particular product or service i.e. who initiates the buying decision.

§Influencer: a person whose views or advices carries some weight in making the final decision.

§ Decider:is the one who ultimately makes a buying decision or any part of it, i.e. whether to buy, what to buy, where to buy. One or more people may be a decider.

§Buyer: the person who makes the actual purchase.

§User: the person who uses or consumes the product.

A company needs to identify who occupies these roles because they affect product design, promotion, and other marketing strategy

The Consumer Buying Decision Process

It is made up of the following five steps;

STEPS IN CONSUMER BUYING DECISION PROCESS:

1)Problem recognition; It is the stage when the individual recognizes a need or problem to be satisfied or solved. The need can be triggered by either an internal stimulus (hunger, thirst, or sex), or externalstimulus (bread, car, or ad)

2)

2)Information research; Of key interest to the marketer are the major information sources:

·Personalsource- family neighbours, acquaintances

·Commercialsources- sales persons, dealers , packaging displays

·Publicsources- mass media, consumer-rating organizations

·Experientialsources- handling, examining, or using the product

The relative amount and influence of these information sources vary with the product category and buyer’s characteristics.

3)Evaluation of alternatives; The consumer develops a set of brand beliefs about a brand, which make up the brand image. The brand image will vary with his/her experiences as filtered by the effects of selective perception, selective distortion and selective retention. The consumer may evaluate brands on the basis of price, product design, colour, packaging, after-sales service, etc.

4)Purchase decision; Having evaluated various solutions, the buyer may develop a predisposition to make a purchase. However, two factors can intervene between the purchase intention and the purchase decision that may change the purchase intention, e.g.

·The attitude of others

·Unanticipated situational factors

In executing a purchase intention, the consumer may take up to five purchase sub-decisions;

·A brand decision (brand A)

·Vendor decision (dealer 2)

·Quantity decision (1 computer)

·Timng decision (weekend)

·Payment method decision (cash/credit)

5)Post purchase behaviour; The consumer will experience some level of satisfaction or dissatisfaction. Buyers do not follow the general decision sequence at all times. The procedure may vary depending upon;

·The time available

·Levels of perceived risk

·The degree of involvement a buyer has with a product.

Marketers should provide after sales service and support to assure customer satisfaction.

Involvement

Involvement may be in terms of relevance and importance and is of two types;

a)High involvement; This occurs when a consumer perceives an expected purchase which is not only of high personal relevance but also represents a high level of perceived risk. Cars, washing machines, houses and insurance policies fall in this category.

b)Low involvement; This suggests little threat or risk to the consumer. Low priced items such as washing soap, cooking oil, and breakfast products are bought frequently, and past experience of the product class and the brand cues the consumer into a purchase that require little information or support.

Types of consumer problem solving behaviour:

Consumer decision-making varies with the type of buying decision. More complex decisions are likely to involve more buying participants and more buyer deliberations. There are three types of consumer problem-solving behaviour:

1)Routine response behaviour; This occurs when consumers buy low cost, frequently purchased items. The buyers have very few decisions to make. They know a lot about the product class and the major brands available and they have fairly clear preference among the brands. In general, consumers do not give much thought, search or time to the purchase. Marketers must satisfy current consumers by maintaining sufficient quality service and value. They must also try to attract new buyers by introducing new features and using point of purchase displays and price deals.

2)Limited problem solving; Buying is more complex when buyers confront an unfamiliar brand in a familiar product class (e.g. a new brand of radio or toothpaste). E.g. people thinking about buying new music equipment may be shown a new brand with a new shape and new features. They may ask questions and watch adverts to learn more about the new brand. This is described as limited problem-solving because buyers are fully aware of the product class but are not familiar with all the brands available and their features.

3)Extensive problem solving; Sometimes buyers face complex buying decisions for more expensive, less frequently purchased products in a less familiar product class. For these products buyers do not often know what brands are available and what factors to consider in choosing between brands. E.g. suppose you want to buy an expensive stereo component system, you would probably spend time visiting several shops collecting information and comparing various brands before making the final decision.

TYPES OF CONSUMER BUYING BEHAVIOUR

From the understanding of general decision making process, perceived risk and involvement theory, it is possible to identify the following buying behaviours;

1)Complex buying behaviour; It involves three- step process;

·The buyer develops beliefs about a product,

·Then develops attitude,

·Then makes thoughtful choice

Consumers are highly involved in a purchase and are aware of significant differences among brands.

Marketing communication should reinforce past decisions by stressing the positive features of the product or by providing more information to assist its use and application.

Organizational/ Industrial Buyer Behaviour

Businesses ask themselves the same questions as consumer marketers i.e. who are our buyers and what are their needs. How do buyers make their buying decisions and what factors influence these decisions? What marketing programs will be most effective?

Definition: industrial buying is the decision making process by which formal organizations establish the need to purchase products and identify, evaluate and choose among alternative brands and suppliers.

Types of organizational markets;

1) The industrial market; It consists of all organizations acquiring goods and services that enter into the production of other goods and services that are sold or supplied to others. It is the largest organizational market.

2) Reseller market; It consists of all individuals and organizations that acquire goods for the purpose of reselling them to others for a profit. Resellers buy products for resale and for conducting their operations e.g. wholesalers.

3) Government market; It consists of government units from central and local government that purchase or rent goods and services for carrying out their main functions.

4) The institutional market; It is made up of hotels, hospitals, schools, colleges and other institutions that also buy goods and services.

Differences between Organizational and Consumer markets

In some ways organizational markets are similar to consumer markets- both involve people who assume buying roles and make purchase decisions to satisfy needs. But there are differences stemming from market structure, demand, product characteristics, promotion, distribution channels, price, nature of buying unit, and the decision process.

1.Market characteristics

()Size: usually industrial consumers are few in number but purchase larger volumes on a repeat basis.

(cCompetition: industrial organizations are more directly involved in international purchasing.

2.Product characteristics; In industrial markets products are purchased as component parts of other products. More emphasis is given to the technical aspect of the product. Purchases of industrial products are usually governed by customer specifications.

Buyer characteristics; Typical consumer buyers have little knowledge of the product they purchase as contrasted with industrial buyers who are professionally and technically trained. Many industrial purchases involve large sums of money; technically complex products and decisions to purchase take longer and involve several people.

4.Reciprocity; Industrial buyers often select suppliers who may also buy from them e.g. a paper company that buys needed chemicals from a chemical company that in turn buy’s the company’s paper.

5.Channel characteristics; In industrial markets, channels are direct where buyers often buy from producers rather than through middlemen.

6.Promotional characteristics; Personal selling is the dominant mode of promotion in industrial markets and advertising may only be used to lay a foundation for personal selling. Sales people act as consultants.

7.Price; Generally in industrial buying, price takes less prominence. Factors of interest are quality, product consistency, certainty and timeless of delivery, service and technical support.

8.Demand; Demand for industrial products is derived demand. It ultimately comes from demand for consumer goods. A cloth manufacturer buys cotton because consumers buy cloth. If consumers demand for cloths declines, so will the demand for cotton and all other products used to make cloth.

The demand is also inelastic in organizational markets i.e. total demand is not much affected by price changes especially in the short-run e.g. a drop in the price of leather will not cause shoe manufacturers to buy more leather unless it results in lower shoe prices that in turn would increase customer demand for shoes.

Participants in the industrial buying process- The buying centre

Thisis the group of people who make the buying decision. The group consists of all people who influence, whether positive or negative, at one or more stages of the purchasing process. The Decision Making Unit(D.M.U) has people playing the following roles;

.The gate keeper: he controls the flow of information, ideas and instructions. Such roles may be played by the receptionist/secretary who controls the buying organization’s diary. A gate keeper could also be a specialist who can feed relevant information to the rest of the D.M.U.

2.Influencers: are people such as engineers, accountants or the board of directors. They help define product specifications and provide information for evaluating alternatives. Technical personnel are particularly important influencers.

3.Users: are members of the organization who will use the product. In many cases they initiate the buying proposal and help define product specifications.

4.Buyers: they are people with formal authority to select the supplier and arrange terms of purchase. They negotiate with the selected supplier on issues such as price, delivery time, mode of delivery, etc.

5.Deciders: are people who have formal or informal power to select or approve the final suppliers. In routine or straight buying, the buyers are often the deciders.

The buying centre concept presents a challenge to the industrial marketer who must learn the following;

·Who is involved in the decision?

·What decisions do they make?

·What is their relative degree of influence?

·What evaluative criteria does each participant use?

Only when the above questions have been answered can the supplier plan the campaign to inform the key persons within the D.M.U. A multi-faceted attack may be necessary, involving direct mail, personal contact, as well as the use of advertising.

Industrial Buying Situations (classes):

1.Straight re-buy; it is where the buyer knows his own requirements and the products on offer. The items tend to be regular purchases and the process is in most cases repeated frequently. A buyer would most likely purchase from the same supplier and it is often hard for another supplier to break into such a market.

2.Modified re-buy; in this category would fall the purchase of either a new product from an existing or known supplier, or the purchase of an existing product from a new supplier. It usually involves more decision participants.

3.New task; involves the purchase of new unfamiliar products from previously unknown suppliers. In this situation the buyer must obtain a lot of information about alternative products and suppliers. He must determine the following;

The buyer makes the fewest decisions in the straight re-buy and most in the new task situation. The new task situation is the marketer’s greatest opportunity. He tries to reach as many people with key buying influences as possible, and providing useful product information.

Industrial Buyer Decision Making Process

In the industrial buyer decision making process, buyers facing a new task buyer situation will usually go through all stages of the buying process and those making straight or modified re-buys may skip some of the stages. They are;

1.Problem recognition; The process begins when someone in the firm recognizes a problem or need that can be solved by acquiring a specific product. The company may decide to launch a new product and need new equipment and materials to produce it or a machine may break down and need new parts etc.

2.General need description; Thisis description of the general characteristics and quantity of the needed item. Emphasis here is on reliability, durability, price and other attributes desired in the item.

3.Product specification; The item’s product specifications are analyzed and the purchasing team (D.M.U.) decides on the best product characteristics and specify them accordingly.

4.Supplier search; This is carried out to find the best suppliers. Some suppliers may not be considered because they are not large enough to supply the needed quantity or because they have poor reputation. The supplier’s task is to get listed in major directories and build reputation in the marketplace. Salespeople should watch for companies in the process of searching for suppliers and ensure their firm is considered.

5.Proposal solicitation; The buyer invites qualified suppliers to submit proposals. When the item is complex or expensive, the buyer will need detailed written proposals from each potential supplier.

6.Supplier selection; The buying centre (D.M.U.) reviews the proposals andselects a supplier. They will consider the technical competence of various suppliers, their ability to deliver the item on time and also deliver the necessary services. The following attributes have a strong influence on the relationship between the supplier and customer;

Quality of products, on time delivery, competitive prices,and delivery terms.

7.Order routine specification; This involves preparing the final order with the chosen supplier, listing the technical specifications, quantity needed, expected time of delivery, e.t.c.

8.Performance review; Here the buyer reviews the performance of the supplier. The buyer may retain, modify, or drop the supplier in future hence the supplier should ensure that he is giving the expected satisfaction.

Personal Determinants of Consumer Behaviour

These are needs, motivation, perception, learning, beliefs, and attitudes.

1.Needs and Motivation

·A motive is a need that is sufficiently pressing to drive a person to act.

·Needs are either physiological-(hunger, thirst, comfort), or psychological-(recognition, self-esteem, etc.).

·Marketers study motivation theories for consumer analysis and marketing strategy. Three of the best known theories are those of Sigmund Freud, Abraham Maslow and Fredrick Herzberg.

Freud’s theory

1.Assumes that the psychological forces shaping people’s behaviour are largely unconscious, and that a person cannot fully understand his/her own motivation.

2.When a person examines specific brands, he/she will react not only to their stated capabilities, but also to other less conscious cues.

3.Shape, size, weight, colour and brand can all trigger certain associations and emotions in the consumer. Motivation researchers often collect “in-depth interviews” to uncover deeper motives that trigger the purchase of a product.

Maslow’s theory

·In order of importance, they are physiological needs, safety needs, social needs, esteem needs and self- actualization.A person will try to satisfy their most important needs first, after which he will then try to satisfy the next higher need. The theory helps marketers to understand how various products fit into the plans, goals, and lives of consumers.

Herzberg’s theory

He developed a two- factor theory that distinguishes dissatisfiers(factors that cause dissatisfaction) and satisfiers(factors that cause satisfaction).Satisfiers must be actively present to motivate a purchase. The implications are that sellers must do their best to avoid dissatisfiers e.g. poor instructions manual. The manufacturers should identify the major satisfiers and motivators and supply them to buyers.

Perception

Perception is a process by which an individual selects, organizes and interprets stimuli into a meaningful, coherent image or picture of the world. simply said it is how an individual views a particular product.

A motivated person is ready to act and how he acts is influenced by his or her perception of the situation. Two people in the same motivated state and objective situation may act quite differently because they perceive the situation differently. People can emerge with different perceptions of the same object because of three perceptual processes: selective attention, selective distortion, and selective retention.

Learning

Learning can be defined as ‘a relatively permanent change in behaviour that occurs as a result of experience or reinforced practice’.

Most human behaviour is learned.

Two main approaches to learning are:

·Behavioural-association, reinforcement and motivation.

·Cognitive-processing information in order that problems can be resolved.

Learning theory teaches marketers that they can build up demand for a product by associating it with strong drives, using motivating cues, and reinforcement.

Personality Theories

Personality is, essentially, concerned with the inner properties of each individual, those characteristics that differentiate each of us.

Freudian theory of personality; psychoanalytic theory:

It assumes that the needs which motivate human behaviour are driven by primary instincts- life and death. The life instincts are considered to be predominantly sexual in nature, whereas the death instincts are believed to be manifested through self-destructive and/or aggressive behaviour. The personality of an individual is assumed to have developed in an attempt to gratify these needs, and consists of theid (pleasure seeking), super ego (acts within the rule of the society) and ego.

Trait theory:

Traits are distinguishing, relatively enduring ways in which one individual differs from another. Personality is measured and quantified e.g. the degree of assertiveness, responsiveness to change or level of sociability.

Marketers identify specific traits and then develop consumer profiles which enable a distinct market segment to be determined.

For example, Aspirers seek status and self- esteem (materialism) and are targeted with products which act as symbols of achievement e.g. designer clothes, latest hi-fi etc.

Consumers are social and cultural human beings. Their behaviour is affected by the social setting they find themselves in as well as the cultural practices of the community they live in.

1)Culture:

It refers to the ways of life of a people. It is a set of socially transmited beliefs, attitudes, norms and customs. Culture is learned from parents, teachers, and society in general. Culture describes the prescribed acceptable behaviours and norms of a society. Marketers has to understand the changes in cultural shifts in a society in order to capture opportunities to serve them in a better manners. Any marketer must be familiar with the culture of the people they wish to sell to.

2)Social classes:

It is the division of the society into groups. It is also known as social stratification. Social functions have to be performed by a society for it to survive. Stratification in the world is done on the bases of education, occupation, income or economic and political station. In some societies eight to nine strata were found but in most of the society three classes were found i.e Upper class, middle class and lower class.

A social class is an open aggregate of people with a similar social ranking. It is open since people can move in and out of the group. Mobility may take the form of education, occupation, talent, marriage, etc. Within a social class, people will to a certain extent have the same patterns of behaviour, similar attitudes, values, possessions, etc.

Characteristics of social classes;

People within the same social class exhibit similar behaviour.

People are ranked as occupying an inferior or superior social position according to their social class.

A social class is not indicated by any single variable, but is as a result of the weighed function of an individual’s occupation, place of residence, wealth, education, values, e.t.c.

The marketer has to identify the class differences due to the following reasons;

·Each class will have certain products that appeal to them and others that do not appeal to them. The marketer has to concentrate their marketing effort on specific social classes.

·In the same social class, there may be individual tastes that the marketer needs to take into consideration. The kind and quality of the product selected may vary from one consumer to another.

·Difference in classes may also show in marketing areas the consumers frequent.Certain classes may have a preference for a given shop, club, restaurant etc.

·The media habits of different classes will also differ. Some members of a class may read different newspapers and listen to different programs or watch different stations on T.V.

)Reference groups:

Reference group is a group of people who have direct or indirect influence on the individuals behaviour. It acts as point of comparison or refence point/frame of reference for an individual’s behaviour.

Reference groups can be classified in to many Types; based on the degree of involvement we can classify into two groups i.e primary and secondary groups.

Primary groups: - these are groups that are small and very close to the consumer. The consumer has direct contact with group members and often has face-to-face communication with them. They include the family, co-workers and those one spends his leisure time with.

Secondary groups: - are larger and less intimate than the primary group. The consumer contact with this group may not be as frequent as those of the primary groups. They include religious organizations, professional organizations, clubs, unions, etc.

Rationale groups; - these are membership groups that a person may join. They engage in activities which interest the consumer to express his idea, be guided and influenced in the type of goods consumed. They include YMCA, YWCA, scouting movement, etc.

The reference group has norms that the members abide by. These norms promote conformity within the reference group. A reference group may influence the decision to buy in two ways;

·Being a member of a group, a person may buy a product or service since all those in the group have done so. A person may buy a product or service for the reason of wanting to belong to or be associated with the group.

·Some products can be sold by appealing them to a reference group. The consumer will use others as a point of reference;

·If he lacks specific experience in the purchase or use of a product, service or idea.

·When available sources of marketing information are judged as biased or inadequate.

·When the outcome of a consumer’s decision is highly visible and therefore open to disapproval from others.

·When the products are in high risk category e.g. are expensive.

4)Role of Opinion leaders:

These are the pace setters or trend setters. They are the people who will first venture into sampling a new product before the others. They would then give information to the others before they commit themselves to buy the product or service. The opinion leaders or the pace setters are respected and serve as a source of advice to the rest. Characteristics of opinion leaders are;

·They are more interested and better read in areas they influence.

·They are more self confident and sociable.

·They are slightly more innovative i.e., they take risks but cautiously so.

The word of mouth becomes an important tool for the spread of information here. The opinion leaders are the first to receive advertising messages and then pass them on to the others. Marketers should identify the opinion leaders first and focus information on them so that they can then influence others.

5)The Family

A Family comprises of two or more persons living together connected through blood or marriage or adoption and stay together. Different family structures were observed in the socieity i.e married couples, nuclear family (parents and children) and extended family(parents+children+grandparents+uncles). Members of a family have a role in the buying process and the roles will depend on the product purchased. There are three important players in the family, they are husband, wife and children. These roles may be grouped as;